4 ms·

Stripe don’t get even close to the full fee of card transactions. Most goes to the issuing bank. They would be lucky to clear 0.8% of a card transaction and it’

Stripe don’t get even close to the full fee of card transactions. Most goes to the issuing bank. They would be lucky to clear 0.8% of a card transaction and it’s likely much lower

arcticbull 5y ago
When Square published its card processing margins in quarterly reports, they kept about 1% - roughly a 33% margin. They have since stopped publishing this metric. For instance here, page 7 [1] in Q4 2016, Square reported a 1.04% transaction margin against 2.94% transaction revenue. [1] https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ-2016-Q4-Shareholder-Letter.pdf https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ...
- matdehaast 5y ago
  Thanks that’s handy to know! At their volume they can obviously get better rates from the bank. I do wonder knowing that what the actual revenue is and perceived IPO valuation. I can’t see it being $100B unless they doing crazy numbers on their other products
  - qwytw 5y ago
    In EU (which I assume is a significant market) the max banks can charge is 0.2/0.3%. Their standard fee is 1.4% + €0.25, so yeah, they should probably end up with ~1% or so. I'd assume their margins in other less regulated markets should be similar
    - amedvednikov 5y ago
      Why can't this law be introduced everywhere else. It makes no sense to pay so much for simple payments.
      - arcticbull 5y ago
        Most of interchange goes to the issuing banks to pay for loan origination, defaults, chargebacks and most significantly reward programs. The EU doesn't really have comparable credit card based reward programs since they can't fund them with the smaller interchange. It's kind of six of one, half a dozen of the other.
      - ksec 5y ago
        In countries without these regulations Visa and Master argued most of these processing fees goes back to customer as cash back or gift or other forms of benefits. In the AUS and EU ruling the court simply decided that is not a business model being accepted in the market. And tell them to put out a fair price of payment processing. And most of the payment in EU are still done via Debit Card or something similar so they have less leverage. Along with high level of fraud in US credit card compared to EU.
thedangler 5y ago
You are forgetting the $0.30 per transaction. That is pure profit for them too.
- matdehaast 5y ago
  Not forgetting it but it doesn’t move the needle much. If you assume an average card transaction size of $10, which is likely higher. That is only 0.3% of processing which may increase revenue by 30% at best.
  - dogbox 5y ago
    You're off by an order of magnitude - $0.30 of $10 is 3%, which overshadows the 0.8% by quite a bit. Although I agree that $10 is most likely a low estimate, I'd expect $0.30 per charge to have a very non-trivial impact.
    - matdehaast 5y ago
      Well spotted. My quick math was very incorrect. Thanks for the correction
- granzymes 5y ago
  Card fees have both a variable (X percent) and fixed (Y cents) portion. For example, a transaction using a Visa credit card might cost 2.7% plus $0.10.
SmellTheGlove 5y ago
Right but they’re talking revenue, which isn’t net of expenses.

Stripe don’t get even close to the full fee of card transactions. Most goes to the issuing bank. They would be lucky to clear 0.8% of a card transaction and it’s likely much lower

arcticbull 5y ago

When Square published its card processing margins in quarterly reports, they kept about 1% - roughly a 33% margin. They have since stopped publishing this metric. For instance here, page 7 [1] in Q4 2016, Square reported a 1.04% transaction margin against 2.94% transaction revenue. [1] https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ-2016-Q4-Shareholder-Letter.pdf https://s29.q4cdn.com/628966176/files/doc_financials/2016/SQ...

matdehaast 5y ago
Thanks that’s handy to know! At their volume they can obviously get better rates from the bank. I do wonder knowing that what the actual revenue is and perceived IPO valuation. I can’t see it being $100B unless they doing crazy numbers on their other products
- qwytw 5y ago
  In EU (which I assume is a significant market) the max banks can charge is 0.2/0.3%. Their standard fee is 1.4% + €0.25, so yeah, they should probably end up with ~1% or so. I'd assume their margins in other less regulated markets should be similar
  - amedvednikov 5y ago
    Why can't this law be introduced everywhere else. It makes no sense to pay so much for simple payments.
    - arcticbull 5y ago
      Most of interchange goes to the issuing banks to pay for loan origination, defaults, chargebacks and most significantly reward programs. The EU doesn't really have comparable credit card based reward programs since they can't fund them with the smaller interchange. It's kind of six of one, half a dozen of the other.
    - ksec 5y ago
      In countries without these regulations Visa and Master argued most of these processing fees goes back to customer as cash back or gift or other forms of benefits. In the AUS and EU ruling the court simply decided that is not a business model being accepted in the market. And tell them to put out a fair price of payment processing. And most of the payment in EU are still done via Debit Card or something similar so they have less leverage. Along with high level of fraud in US credit card compared to EU.

thedangler 5y ago

You are forgetting the $0.30 per transaction. That is pure profit for them too.

matdehaast 5y ago
Not forgetting it but it doesn’t move the needle much. If you assume an average card transaction size of $10, which is likely higher. That is only 0.3% of processing which may increase revenue by 30% at best.
- dogbox 5y ago
  You're off by an order of magnitude - $0.30 of $10 is 3%, which overshadows the 0.8% by quite a bit. Although I agree that $10 is most likely a low estimate, I'd expect $0.30 per charge to have a very non-trivial impact.
  - matdehaast 5y ago
    Well spotted. My quick math was very incorrect. Thanks for the correction
granzymes 5y ago
Card fees have both a variable (X percent) and fixed (Y cents) portion. For example, a transaction using a Visa credit card might cost 2.7% plus $0.10.

SmellTheGlove 5y ago

Right but they’re talking revenue, which isn’t net of expenses.